Destroying The "But Everyone's So Negative, Stocks Can't Drop" Meme In One Chart

Day in, day out, we hear it... It's "the most unloved rally"; Stocks are in "the Rodney Dangerfield rally"; there's still all the "money on the sidelines." Well, it seems, judging by Investors Intelligence surveys of those "not bullish" (bearish or expecting a correction), that investors have never (ever) been more lovingly, respectfully, all-in with this rally... (but that's just the facts speaking - not the asset-gathering, always stay long, commission-snatching soundbites).

Every time someone says, “There is a lot of cash on the sidelines,” a tiny part of my soul dies. There are no sidelines. Those saying this seem to envision a seller of stocks moving her money to cash and awaiting a chance to return. But they always ignore that this seller sold to somebody, who presumably moved a precisely equal amount of cash off the sidelines.

If you want to save those who say this, I can think of two ways.

First, they really just mean that sentiment is negative but people are waiting to buy. If sentiment turns, it won’t move any cash off the sidelines because, again, that just can’t happen, but it can mean prices will rise because more people will be trying to get off the nonexistent sidelines than on.

Second, over the long term, there really are sidelines in the sense that new shares can be created or destroyed (net issuance), and that may well be a function of investor sentiment.

But even though I’ve thrown people who use this phrase a lifeline, I believe that they really do think there are sidelines.

There aren’t. Like any equilibrium concept (a powerful way of thinking that is amazingly underused), there can be a sideline for any subset of investors, but someone else has to be doing the opposite.

The question then becomes will the Pratorian Guard (SS, NSA, CIA, DHS, TSA, State and Local Police Departments) along with the military declare open warfare on the American people to save his bath house butt?

Washington himself led the military to crush the Whiskey Rebellion; Macarthur led a cavalry charge against the Bonus Army (after having them gassed with lewisite); the National Guard opened fire at Kent State; the pigs dropped a firebomb on MOVE and burnt an entire city block to the ground, killing men, women and children (most of whom were not part of MOVE); Lon Horiuchi and the rest of the pig sociopath trigger-men 'lit up' Waco and Ruby Ridge.

So why is there even a question? What gives you the slightest impression that the public should expect mercy from the order-following high-school dropouts who are specifically selected for stupidity and obedience, and who SCOTUS declared have no positive duty to protect us, but only a general duty to enforce the law as decreed by their opverlords? (The relevant case cites: South v. Maryland, 59 U.S. 396 [1856]; reaffirmed in, inter alia, Warren v. District of Columbia 444 A.2d. 1, DC Court of Appeal [1981]).

He may very well try, but THIS time there is actually a much, MUCH larger number of people who are awake - including some who are in positions of power (and former military), just waiting for the right time to step up. Just look around and see how many alternative news websites are posting informative commentary about our hijacked government. There are a lot of insiders who are leaking information. I believe if there were a crisis here at home, there would be some trying times - but in the end, there would be positive changes. Too many people know too much now to take much more of what is going on in Washington, and I bet many of those who would be asked to aim guns at us will turn them where they belong when push comes to shove...or at least, when their first paycheck bounces.

As intended, me thinks. Mission nearly accomplished. In which South American country has Oboom! chosen to purchase 40K acres and a small army to protect the perimeter? North Carolina, according to one.

There IS money on the sidelines. But the capital driving this rally is coming from other markets.

It is a global ecomony. Look at the relative performance of other markets and it will make more sense. The US market is not a fish bowl.

And the argument that the "seller sold to somebody, who presumably moved a precisely equal amount of cash off the sidelines" is not always a fair representation of cash on the sidelines because it ignores money flow / volumes. Prices can be bid up on low volume. Just because it's rallying, doesn't mean it's rallying on volume.

This is not the case at the moment as volumes in the US have been realtively healthy.... but that does not mean it can't be the case in other instances. So this argument is wrong and can be proven so.

Saying there are no sidelines makes an assumption that there is a fixed amount of money in the stockmarket at any one time, and that it is impossible to generate money OUTSIDE of the stockmarket to put it in.

I am gainfully employed and fortunate enough to be able to save money. I keep my money ON THE SIDELINES waiting for opportunities to invest. My money that sits ON THE SIDELINES is what I earn from my salary. I didn't get it from the stockmarket. Putting it into the stockmarket is a capital inflow and will raise the aggregate price of assets. This is like capital markets 101.

If you factor in the 1-2% expense ratio, it becomes obvious that only a complete moron would buy mutual funds. You could retire rich just by buying and selling SPY and QQQ at the right time. Very few managed funds outperform the index, and it's actually against the law for mutual funds to short stocks. This is why hedge funds tend to do well during bear markets but mutual funds get destroyed.